2015 was a tumultuous year for coal. It started with additional restrictions on China imports and ended with the first global agreement to control global temperature increases at the 21st COP in Paris. In between, the story was focused on lack of demand growth.
China supports domestic coal production
The global coal demand story cannot be told without China as the protagonist. In a further attempt to support the domestic coal industry, the Chinese government implemented trace element restrictions at the start of 2015. The limits officially applied to all coal, but were actually applied almost exclusively to imported material. Consequently coal sellers and buyers found China sales risky given uncertainty over testing procedures and this particular policy had the single largest impact on trade in 2015.
Chinese announcements in 2015
There were few sources of demand for coal imports to replace that lost in China. India and southeast Asia provided a modest boost but coal consumption fell in the UK, Germany and the US. Carbon pricing, renewable efficiency targets, and coal displacement in the power sector were all themes contributing to the demand growth woes facing global coal.
2015 an inflexion point for supply capacity
The historic agreement reached at COP21 could be a longer term potential game changer for demand however is unlikely to make any real impact in 2016. We expect to see countries begin to position themselves from a policy perspective to usher in a low-carbon future, which will have near-term implications for investment in the coal and power sectors, but there are more imminent factors likely to impact the global market.
This could be known as the year when the tide began to turn as the pressure on coal exporters reached breaking point. 2015 may be remembered as an inflexion point for supply capacity with an increase in bankruptcies and a material pull-back in supply from high cost regions, however it is insufficient to counter falling demand.
Next in the series... global coal: 2016 outlook
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